New Challenges of PPP in Economic Development

CPN UMaoist and Nepali Congress are agreed in new model of development as PPP approach in new constitution.  Since PPPs have worked so successfully in advanced democracies with free market tendencies such as the U.S., Australia, New Zealand, and the U.K., but the same concept is not enjoyed the same level of the other parts of the Europe.

PPP modality is succeeding in many of the developed and developing countries. But it is not assured developing countries can success or not. Expert says welfare state cannot achieve the success because of its less free market policy. US, Australia, New Zealand and UK have successful implementation of PPP. Many European countries are still welfare states, with excessive reliance on the state instead of free individuals and free markets.

If we go through the Nepalese economy it seems welfare, it gives the subsidies to the poor and disadvantage people. Government is so weak; monopoly, syndicate, and curtailing are everywhere. So, in this context of economic cannot adjust the PPP policy. In the PPP model private sector can take more benefit then public sector. To take more profit and advantage it must be transparent and competitive. In the monopoly and welfare state it is impossible to be successful implementation of PPP.

PPP itself is nothing but implementation with honestly by policy maker is important. This is just a contract between government, civil society and private sector. Basically private sector and government is important to cross check each other in their agreement. Civil society is just a watchman, who has the role to alert both side.

Our previous development strategy is failed because of lack of the accountability of government and its ruling bodies. But PPP concept in developed in slightly different form from totally people's participatory and trickledown theory. It has joint agreement between private and government sectors, both of the parties are two wheels of a cart. If one broken, other cannot stands.

Public–private partnership (PPP) describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP, P3 or P³.

Any collaboration between public bodies, such as local authorities or central government, and private companies tends to be referred to a public-private partnership (PPP). Retrieved from www.bbcnews.com published on Wednesday, 12 February, 2003, 18:58 GMT

Typically, a private-sector consortium forms a special company called a "special purpose vehicle" (SPV) to develop, build, maintain and operate the asset for the contracted period. In cases where the government has invested in the project, it is typically (but not always) allotted an equity share in the SPV. The consortium is usually made up of a building contractor, a maintenance company and bank lender(s). It is the SPV that signs the contract with the government and with subcontractors to build the facility and then maintain it. In the infrastructure sector, complex arrangements and contracts that guarantee and secure the cash flows and make PPP projects prime candidates for project financing. A typical PPP example would be a hospital building financed and constructed by a private developer and then leased to the hospital authority. The private developer then acts as landlord, providing housekeeping and other non-medical services while the hospital itself provides medical services.

Pressure to change the standard model of public procurement arose initially from concerns about the level of public debt, which grew rapidly during the macroeconomic dislocation of the 1970s and 1980s. Governments sought to encourage private investment in infrastructure, initially on the basis of accounting fallacies arising from the fact that public accounts did not distinguish between recurrent and capital expenditures.

The idea that private provision of infrastructure represented a way of providing infrastructure at no cost to the public has now been generally abandoned; however, interest in alternatives to the standard model of public procurement persisted. In particular, it has been argued that models involving an enhanced role for the private sector, with a single private-sector organisation taking responsibility for most aspects of service provisions for a given project, could yield an improved allocation of risk, while maintaining public accountability for essential aspects of service provision.

Initially, most public–private partnerships were negotiated individually, as one-off deals. In 1992, however, the Conservative government of John Major in the United Kingdom introduced the private finance initiative (PFI), the first systematic programme aimed at encouraging public–private partnerships. The 1992 programme focused on reducing the Public Sector Borrowing Requirement, although, as already noted, the effect on public accounts was largely illusory. The Labour government of Tony Blair, elected in 1997, persisted with the PFI but sought to shift the emphasis to the achievement of "value for money," mainly through an appropriate allocation of risk.

But in Nepal it is started and developed since 1990.  Private sectors also arisen in different development activities when privatization act is passed in 2048 BS.

Even Jhara or free labour- constructed Panchayat buildings, irrigation canals, school buildings, roads had already in practiced in our development practices. Jhara is dropped and driven the people participatory approach after 1990. In this participatory approach there were lots of work have been done like Schools, roads, irrigations, community buildings, religious, cultural sites are the major areas are developed.

Trust (guthi)- an indigenous way of investing in private property for the benefit of communities around or public in general. In Guthi private capital is involved but not for profit purpose. Sanctity of Guthi is diluted in modern trusts organizations-little or no contribution from individuals. Guthis can’t be expected as a model of mass scale economic development initiative since it is involuntary without expecting return on investment. Co-operatives could be the entities for economic development than Guthis. Certain group of the people uses the money in "Dhukuti" also the way of financing according to the need of them. This is also the foundation of modern public private partnership.

Public-Private Partnerships for Urban Environment (PPPUE) is a nationally executed UNDP project implemented by the Ministry of Local Development of the Government of Nepal. The project will conclude by December 2012. The main activities of PPPUE are policy guidance, institution building & partnership development, capacity development and support to model projects.

Implementing PPPs successfully is not an easy task. Most of the mistakes made are in the conceptualization of the transaction itself or in the absence of an effective legal and regulatory environment. Government cannot avoid such costly mistakes in planning and implementing PPPs. Instead of that the best way is to take advantage of the knowledge and experience gained elsewhere; there is no need to reinvent the wheel.

Nepal is creeping in development activities on the eve of federalism, government system is transitional, and constitution is not confirmed yet. We have to thank our Maoist leaders, they force to keep the PPP approach in federalism; it is either bravery to carry the load of internal chaos in future development policy or they are totally foolish.